SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
FINANCIAL INDUSTRIES CORPORATION
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(Name of Registrant as Specified In Its Charter)
OTTER CREEK MANAGEMENT INC.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
(5) Total fee paid:
____________________________________________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
(3) Filing Party:
____________________________________________________________________
(4) Date Filed:
____________________________________________________________________
PRELIMINARY COPY, SUBJECT TO COMPLETION
DATED JUNE _, 2003
PROXY STATEMENT
OF
OTTER CREEK MANAGEMENT INC.
IN OPPOSITION TO THE BOARD OF DIRECTORS
OF
FINANCIAL INDUSTRIES CORPORATION
-----------------------
2003 ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement and the accompanying form of GOLD proxy card are
being furnished by Otter Creek Management Inc., a Delaware corporation ("Otter
Creek"), to the owners of shares of Common Stock (the "Common Stock") of
Financial Industries Corporation (the "Company") in connection with the
solicitation by Otter Creek of proxies from such stockholders to be voted at the
Company's 2003 Annual Meeting of Stockholders and at any adjournments,
postponements or rescheduling thereof (the "Annual Meeting"). The annual meeting
is scheduled to be held at _____ a.m. local time on _____, 2003. Otter Creek is
soliciting proxies for use at the Annual Meeting. Such proxies shall only confer
authority on Otter Creek to: vote for the election as directors only those
nominees named hereinbelow; vote at the Annual Meeting; and, consent to or
authorize only such action on the matters described herein.
According to the Company's revised preliminary proxy statement filed with
the Securities and Exchange Commission (the "S.E.C.") on April 18, 2003, 11
individuals will be elected at the Annual Meeting to the Board of Directors of
the Company (the "Board"). However, Otter Creek is soliciting proxies from the
holders of Common Stock to elect the seven individuals named below under the
heading "ELECTION OF DIRECTORS--Otter Creek Nominees" as the directors at the
Annual Meeting (the "Otter Creek Nominees"). Otter Creek intends to nominate the
Otter Creek Nominees for election at the Annual Meeting and to vote for such
nominees. The Otter Creek Nominees are all independent nominees who would be
qualified to serve on the Board's Audit Committee if elected.
Except as indicated in the following two sentences, each share of Common
Stock is entitled to one vote on all matters submitted to the Company's
stockholders. Any stockholder of the Company may exercise the right of
cumulative voting in the election of directors provided the stockholder gives
written notice of such intention to the corporate secretary of the Company on or
before the date preceding the election. When exercising this right, the
stockholder is entitled to one vote for each share held multiplied by the number
of directors to be elected and may cast all such votes for a single nominee or
spread such votes among the nominees in any manner desired.
This Proxy Statement and the accompanying form of GOLD proxy card are
first being sent or given to holders of Common Stock on June ___, 2003.
The Company's principal place of business is located at 6500 River Place
Blvd., Building One, Austin, Texas 78730.
The solicitation is being made by Otter Creek and not on behalf of the
Board.
YOU MAY ALREADY HAVE RECEIVED, OR WILL SOON RECEIVE, A PROXY CARD FROM THE
COMPANY. PLEASE RETURN ONLY OTTER CREEK'S GOLD PROXY CARD AND DO NOT RETURN ANY
COMPANY PROXY CARD UNDER ANY CIRCUMSTANCES. IF YOU RETURN BOTH PROXY CARDS THERE
IS A DANGER THAT YOUR SHARES WILL NOT BE VOTED AS YOU DESIRE BECAUSE ONLY THE
LATEST DATED PROXY CARD YOU SUBMIT COUNTS.
Information About Otter Creek
Otter Creek is an investment advisory firm that manages three investment
funds: Otter Creek Partners I, L.P., a Delaware limited partnership; Otter Creek
International Ltd., a British Virgin Islands investment corporation; and HHMI
XIII LLC, a Delaware limited liability company. The three funds have investment
securities valued at approximately $300,000,000. R. Keith Long, Otter Creek's
sole stockholder, serves as its president. Joseph W. O'Neill Jr. serves as its
chief financial officer. Otter Creek employs three other persons, all full-time.
Otter Creek became a stockholder of the Company in 2001. The principal business
address of Otter Creek is 400 Royal Palm Way #212, Palm Beach, Florida 33480 and
its telephone number is (561) 832-4110.
As of the date of this Proxy Statement, Otter Creek is the beneficial
owner of 419,181 shares of Common Stock, which constitute approximately 4.3% of
the outstanding Common Stock based on the Company's preliminary proxy statement
filed with the S.E.C. on April 18, 2003.
Otter Creek has become dissatisfied with the Company's performance and
plans and is concerned about preserving the value of its significant investment
in the Company. In particular, Otter Creek questions the current Company
directors for overseeing a 12.2% decline in gross statutory insurance policy
premiums over the last three years and the continually decreasing earnings per
share over that period, which culminated in a $0.53 loss per share in 2002, an
aggregate loss of $5,087,000 (before the cumulative effect of a change in
accounting principle, which change accounted for $10,429,000 in net income).
Over that same three year period, compensation payable to the Company's top four
executives increased by 10%, totaling $3,854,495 in 2002 (inclusive of
compensation paid to former chairman and chief executive Roy F. Mitte). Otter
Creek analyzed the financial results, which were reported in the Company's Form
10-K/A for 2002 filed with the S.E.C. on April 30, 2003, taking into account the
change in the Company's accounting principles and restatements of the Company's
results. Otter Creek analyzed the compensation table set forth in the Company's
proxy statement filed with the S.E.C. on April 29, 2002. See "BACKGROUND OF
OTTER CREEK'S INTEREST IN THE COMPANY AND REASONS FOR THE SOLICITATION" below.
Otter Creek is proposing the Otter Creek Nominees for election to the
Board in opposition to the slate proposed by the Board. Otter Creek and the
Otter Creek Nominees are committed to promoting business objectives, goals and,
values that are in the best interest of all of the Company's stockholders and
although no outcomes can be guaranteed, they are committed to following a
program that will benefit all of the Company's stockholders. See "BACKGROUND OF
OTTER CREEK'S INTEREST IN THE COMPANY AND REASONS FOR THE SOLICITATION--Program
for Enhancing Stockholder Value".
Otter Creek is not subject to the informational filing requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
accordingly is not required to file periodic reports, proxy statements and other
information with the S.E.C. relating to its business, financial condition and
other matters.
IMPORTANT
OTTER CREEK STRONGLY RECOMMENDS THAT YOU VOTE FOR THE OTTER CREEK NOMINEES
BY MARKING, SIGNING, DATING AND MAILING THE ENCLOSED GOLD PROXY CARD PROMPTLY IN
THE ENVELOPE PROVIDED.
HOLDERS OF RECORD OF SHARES OF COMMON STOCK AS OF __________, 2003, THE
RECORD DATE ESTABLISHED BY THE COMPANY FOR VOTING AT THE ANNUAL MEETING, ARE
URGED TO SUBMIT A GOLD PROXY CARD EVEN IF YOUR SHARES HAVE BEEN SOLD AFTER THE
RECORD DATE.
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM,
BANK OR NOMINEE ON THE RECORD DATE, ONLY IT CAN VOTE YOUR SHARES AND ONLY UPON
RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. PLEASE CONTACT THE PERSON RESPONSIBLE FOR
YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR YOUR SHARES TO BE VOTED ON THE GOLD PROXY
CARD.
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QUESTIONS CONCERNING THIS PROXY STATEMENT OR THE ACCOMPANYING GOLD
PROXY CARD SHOULD BE DIRECTED TO:
MELLON INVESTOR SERVICES LLC
44 WALL STREET
NEW YORK, NY 10005
877-688-7273
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VOTING
The information contained in the following paragraphs is based on
publicly-available copies of the Company's Articles of Incorporation, as amended
(the "Articles of Incorporation"), and Bylaws, as amended (the "Bylaws"), and on
information contained in the Company's preliminary proxy statement filed on
April 18, 2003 with the S.E.C.:
The Board has fixed _______, 2003 as the record date for the determination
of the holders of capital stock of the Company entitled to notice of and to vote
at the Annual Meeting. As of _______, 2003, there were 9,625,630 shares of
Common Stock outstanding.
The attendance at the Annual Meeting, in person or by proxy, of the
holders of shares representing a majority of the aggregate votes entitled to be
cast by the record holders of all outstanding shares of Common Stock is
necessary to constitute a quorum. Votes to "withhold authority", abstentions and
"broker non-votes" with respect to any matter to be voted on at the Annual
Meeting will not be voted but will be counted as present to determine whether
there is a quorum for purposes of voting on such matter at the Annual Meeting.
With respect to the election of directors, the affirmative vote of the
holders of shares representing a plurality of the aggregate votes cast at the
Annual Meeting in respect of the election of directors is required for their
election. Because the election of directors will be determined by votes cast
rather than by a percentage of the shares present, votes to "withhold authority"
and "broker non-votes" will not affect the outcome of the election of directors.
If any other matter properly comes before the Annual Meeting, its resolution
will be determined by the affirmative vote of the holders of shares of Common
Stock representing a majority of votes cast at the Annual Meeting with respect
to such matter, unless a higher vote is required under applicable state law.
Accordingly, abstentions will have the effect of a negative vote on any such
matter, but "broker non-votes" will not be voted and will have no effect in
determining whether such matter has received sufficient votes for approval.
Each holder of record of the Company's Common Stock on the record date
will be entitled to one vote for each share held. Stockholders may exercise
cumulative voting rights. Under cumulative voting, each holder of Common Stock
will be entitled to 11 votes per share. Each stockholder may give a single
candidate all the votes such stockholder is entitled to cast or may distribute
such votes among as many candidates as such stockholder chooses. However, no
stockholders may cumulate votes unless at least one stockholder has given notice
to the Secretary of the Company at least one day prior to the meeting of his
intention to cumulate votes. By means of the accompanying GOLD proxy card,
stockholders will grant the proxy holders discretionary authority to cumulate
votes, subject to a stockholder's right to withhold authority to cast cumulated
votes for a particular nominee(s).
If the enclosed form of GOLD proxy card is executed and returned, it may
nevertheless be revoked by the person giving it any time before the vote at the
Annual Meeting either by filing with the Secretary of the Company a written
notice of revocation or by delivering a proxy card bearing a later date than the
most recently submitted proxy card or by attending the Annual Meeting and voting
in person. The execution of a proxy card will not affect a stockholder's right
to attend the Annual Meeting and vote in person, but attendance at the Annual
Meeting will not, by itself, revoke a proxy.
IF YOU, AS A HOLDER OF COMMON STOCK, WISH TO VOTE FOR THE OTTER CREEK
NOMINEES, YOU MUST SUBMIT THE ENCLOSED GOLD PROXY CARD AND SHOULD NOT SUBMIT THE
COMPANY'S PROXY CARD. THE SHARES REPRESENTED BY PROXIES MAY BE VOTED IN THE
DISCRETION OF THE PROXY HOLDERS SO AS TO ELECT THE MAXIMUM NUMBER OF OTTER CREEK
NOMINEES WHICH MAY BE ELECTED BY CUMULATIVE VOTING.
Unless contrary instructions are indicated on the enclosed GOLD proxy
card, all shares of Common Stock represented by valid GOLD proxy cards received
pursuant to this solicitation (which have not been revoked as described above)
will be voted FOR the election of the Otter Creek Nominees and at the discretion
of the proxy holder(s) on such other business as to which Otter Creek did not
have knowledge prior to soliciting proxies as may properly come before the
Annual Meeting. On matters which Otter Creek knew about before the Annual
Meeting but with respect to which express voting authority has not been
solicited, Otter Creek will not vote pursuant to the discretionary authority
assigned to it.
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YOUR VOTE AT THIS YEAR'S ANNUAL MEETING IS ESPECIALLY IMPORTANT.
PLEASE SIGN AND DATE THE ENCLOSED GOLD PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE PROMPTLY.
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ELECTION OF DIRECTORS
General
The Bylaws provide that the Board shall consist of not less than three nor
more than 25 directors, with the exact number to be fixed by resolution of the
Board. Otter Creek is asking the stockholders of the Company to elect the seven
Otter Creek Nominees. According to the Company's preliminary proxy statement
filed with the S.E.C. on April 18, 2003, 11 persons will be elected at the
Annual Meeting to serve as directors on the Board for a term of one year and
until their successors are duly elected and qualified or until their earlier
resignation or removal.
Otter Creek Nominees
At the Annual Meeting, Otter Creek will nominate the Otter Creek Nominees
for election as directors. The information below concerning age and principal
occupation of the Otter Creek Nominees has been furnished by the respective
nominees. Except as described in this Proxy Statement, none of the Otter Creek
Nominees beneficially owns any Common Stock. Each has expressed his intention
that if elected he shall acquire an as yet undetermined number of shares of the
Company's Common Stock in open-market transactions upon the belief that
directors should have a financial stake in the companies on whose boards they
sit.
OTTER CREEK NOMINEES
Name Age Principal Occupation
- ------------------------ ---- --------------------------------------------------------------------------------------------
R. Keith Long 55 Mr. Long has served as president of Otter Creek Management Inc. since founding it in
1991. From 1983 through 1991 he worked at Morgan Stanley in long bond cash/futures
arbitrage. As chairman of the board of Financial Institutions Insurance Group he
oversaw its sale in a leveraged buy-out in 1996. Mr. Long has bachelors and MBA
degrees from Indiana University.
J. Bruce Boisture 53 Mr. Boisture serves as president of Trinity Capital Alliance, Inc., an investment
banking company he founded in 1992, specializing in leveraged buy-outs, start-up
investments, turnarounds and venture capital financings, in connection with which he
has served temporarily in a number of senior management positions in various companies.
From 1986 through 1991 he was a partner and chief operating officer of Rosecliff Inc./Acadia
Partners L.P., a $1.7 billion investment fund. Mr. Boisture has a bachelors degree
from Princeton University, a bachelors in philosophy degree from Oxford University and
a law degree from Yale Law School.
Salvador Diaz-Verson Jr. 51 Since 1991 Mr. Diaz-Verson has served as chairman and president of Diaz-Verson
Capital Investment LLC. From 1979 through 1991 he served as president and chief
investment officer of American Family Life Assurance Co., a New York Stock Exchange
company. A native of Cuba, Mr. Diaz-Verson has a bachelors degree from Florida State
University.
Patrick E. Falconio 61 From 1988 through his retirement in 1999 Mr. Falconio served as executive vice
president and chief investment officer of Aegon USA Inc. Prior to that he worked at
Life Investors Insurance Co., Lincoln National Life Insurance Co. and Prudential
Insurance Co. He has a bachelors degree from Duquesne University and an MBA from the
University of Georgia.
Richard H. Gudeman 65 Mr. Gudeman served as executive vice president at SunGard Insurance Systems Inc.,
and as an actuary at Country Life Insurance Co., Washington National Insurance Co.,
State Farm Life Insurance Co. and Federal Life Insurance Co. over the last 30 years.
He has a bachelors degree from Illinois State University and a masters degree from
Northeastern University.
Steven A. Haxton 45 A certified public accountant, Mr. Haxton is the principal in Haxton Advisors, a
consulting firm. Previously he was an executive vice president at ING, president of
Aetna Financial Services' Financial Intermediary Group, senior vice president of
Aetna Investment Services and president of Nationwide Distributors Inc. He has a
bachelors degree from Malone College.
Lonnie L. Steffen 53 Since 1997 Mr. Steffen has served as president and chief financial officer of
Dearborn Risk Management. From 1991 through 1997 he served as chief financial
officer of Financial Institutions Insurance Group. From 1986 through 1991 he served
as chief financial officer of First Reinsurance Co. of Hartford. A certified public
accountant, Mr. Steffen has a bachelors degree from Northern Illinois University.
None of the corporations or organizations mentioned above is a parent,
subsidiary or other affiliate of the Company.
Each of the Otter Creek Nominees has agreed to be named in this Proxy
Statement and to serve as a director of the Company, if elected. Otter Creek
does not expect that any of the Otter Creek Nominees will be unable to stand for
election or serve as a director, but if any vacancy in the slate of the Otter
Creek Nominees occurs for any reason (including if the Company makes or
announces any changes to the Bylaws or takes or announces any other action that
has, or if consummated would have, the effect of disqualifying any or all of the
Otter Creek Nominees), the shares represented by GOLD proxy cards received by
Otter Creek and not properly revoked will be voted for the substitute candidate
nominated by Otter Creek in compliance with the rules of the S.E.C. and any
other applicable law and, if applicable, the Bylaws.
The persons named in the proxy may cumulate the votes represented thereby
and in case any such nominee shall become unavailable may vote for a substitute.
Under cumulative voting, each holder of Common Stock will be entitled to 11
votes per share, which may be cast for a single candidate or distributed as the
holder otherwise desires.
The Board consists of 11 directors while Otter Creek has nominated seven
individuals. The Otter Creek Nominees, if elected, would constitute seven of 11
directors on the Board; directors elected to fill the remaining four seats on
the Board may choose not to serve. Stockholders who execute and deliver GOLD
proxy cards would not have a vote on the remaining four Board seats. Otter Creek
urges you to vote FOR the Otter Creek Nominees.
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OTTER CREEK RECOMMENDS THAT HOLDERS OF SHARES OF COMMON STOCK VOTE IN FAVOR OF
THE OTTER CREEK NOMINEES FOR DIRECTORS AND NOT VOTE IN FAVOR OF ANY OF THE
COMPANY'S NOMINEES FOR DIRECTORS.
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BACKGROUND OF OTTER CREEK'S INTEREST IN THE COMPANY
AND REASONS FOR THE SOLICITATION
General
Otter Creek is the beneficial owner of 419,181 shares of Common Stock,
which constitute approximately 4.3% of the Company's outstanding Common Stock
based on the Company's preliminary proxy statement filed with the S.E.C. on
April 18, 2003. For a description of recent transactions in Company securities
by Otter Creek, please refer to the section entitled "INFORMATION CONCERNING
PERSONS WHO MAY SOLICIT PROXIES--Participant Ownership of and Transactions in
Company Securities".
Stock Investment
Otter Creek purchased 419,181 shares of Common Stock in 2001, 2002 and
2003 in open market transactions.
Recent Board Actions Considered by Otter Creek to Entrench Management
On December 11, 2002 the Company announced that it had received an
unsolicited letter from Pillar Foundation Group of Austin, Texas expressing
interest in the possible acquisition by Pillar of "all or a part" of the
Company's shares of Common Stock for between $13 and $18 per share. Because the
Company believed the letter contained misleading and inaccurate statements, it
recommended that Company stockholders who had received copies of the letter
refer to the Company's S.E.C. filings for more accurate information concerning
the Company.
On January 27, 2003 the Company announced that it had engaged Salomon
Smith Barney to explore strategic alternatives for the Company, including
consideration of the Pillar proposal, among other options.
On March 2, 2003, the Company announced that it would not put itself up
for sale. The Board of Directors voted 10-1 to implement the business plans of
the Company's management over any other strategic alternative.
On March 18, 2003 Otter Creek and several other Company shareholders
requested that the Company call a special meeting of the Company's shareholders
to remove the Company's directors and replace them with independent directors.
The Company denied the request on March 20, 2003.
On May 15, 2003 the Company agreed to pay $3,000,000 to former Company
chairman and chief executive Roy F. Mitte (and certain parties related to him)
and to withdraw the Company's lawsuit against Mr. Mitte seeking the return of
more than $1,000,000 in Company funds from Mr. Mitte which the Company had
alleged he improperly paid to third parties and used for his personal purposes.
The Company further agreed to pay (or find third-party purchasers to pay) Mr.
Mitte $1,102,714 for his shares of Common Stock and $42,636 for his options. The
Company further agreed to find third-party purchasers to pay Mr. Mitte
$5,681,081 for the balance of his shares. In exchange, the Company obtained a
proxy to vote Mr. Mitte's 1,627,610 shares (including shares owned by parties
related to him), and Mr. Mitte and his son resigned from the Company's Board.
Otter Creek considers the refusal on the part of the Board to engage in
preliminary discussions with prospective acquirers and the agreement to pay or
cause to be paid to Mr. Mitte nearly $10,000,000 for his proxy, shares and
options to be against the best interests of the Company's stockholders. Because
Otter Creek believes that a truly disinterested analysis of strategic
alternatives must include discussions with prospective acquirers, it considers
the Board's action to be only in the best interests of the Company's management.
Furthermore, Otter Creek cannot comprehend how Salomon Smith Barney recommended
against the sale of the Company as a viable option for maximizing stockholder
value. The Company's refusal to consider seeking a buyer has prompted Otter
Creek to seek a change in the make-up of the Company's Board.
Plan to Seek the Sale of the Company
In light of the Company's 2002 financial performance and the Board's
decision not to consider a sale or merger, Otter Creek believes that the
interests of all stockholders will be better served if the Otter Creek Nominees
are elected at the Annual Meeting. If the Otter Creek Nominees are elected at
the Annual Meeting, they are committed to pursuing a policy of enhancing
stockholder value, which would include exploring a sale of the Company, although
no assurances can be given that a sale of the Company will be effectuated. The
Company's stockholders will be kept apprised of the progress of the sale
process.
Lawsuit in Texas State Court
On June 12, 2003 Otter Creek commenced a civil action lawsuit in the
District Court in Travis County, Texas seeking an affirmative injunction to
compel the Company to hold its 2003 Annual Meeting (which pursuant to the
Company's Bylaws should have been held on April 22, 2003) and to compel the
Company either to exercise the proxy it acquired from Mr. Mitte to vote his
shares in the same proportion as the other outstanding shares of the Company are
voted or alternatively not to exercise the proxy.
INFORMATION CONCERNING PERSONS WHO MAY SOLICIT PROXIES
Information Concerning Participants
Under the applicable regulations of the S.E.C., Otter Creek and each of
the Otter Creek Nominees is deemed to be a "participant" in Otter Creek's
solicitation of proxies. The following table(1) sets forth the name, business
address and principal occupation of the Otter Creek Nominees and any other
employee of Otter Creek who may solicit proxies from stockholders of the Company
on behalf of Otter Creek ("Otter Creek Participants").
R. Keith Long president, Otter Creek Management Inc.
Otter Creek Management Inc.
400 Royal Palm Way #212
Palm Beach, FL 33480
J. Bruce Boisture investment banker, Trinity Capital
49 High Street Alliance, Inc.
Farmington, CT 06032
Salvador Diaz-Verson Jr. chairman and president, Diaz-Verson
Diaz-Verson Ventures LLC Capital Investment LLC
260 Brookstone Centre Parkway
Columbus, GA 31904
Patrick E. Falconio retired
2 Symon's Lane
Savannah, GA 31904
Richard H. Gudeman actuary, SunGard Insurance Systems Inc.
2101 Oakwood Ave.
Bloomington, IL 61704
Steven A. Haxton financial consultant, Haxton Advisors
4 Cobtail Way
Simsbury, CT 06070
Joseph W. O'Neill Jr. chief financial officer, Otter Creek
Otter Creek Management Inc. Management Inc.
400 Royal Palm Way #212
Palm Beach, FL 33480
Lonnie L. Steffen president and chief financial officer,
65 Deer Run Dearborn Risk Management
Avon, CT 06001
(1) The companies named in the table above, to the extent that the
participants are officers of such companies, are deemed to be associates
of such participants.
In connection with the engagement of Mellon Investor Services LLC by Otter
Creek as its proxy solicitor in connection with the election of the Otter Creek
Nominees at the Annual Meeting (see "COST AND METHOD OF SOLICITATION"), Otter
Creek anticipates that certain employees of Mellon may communicate in person, by
telephone or otherwise with a limited number of institutions, brokers or other
persons who are stockholders of the Company for the purpose of assisting in the
solicitation of proxies for the Annual Meeting (collectively, "Participants").
Neither Mellon nor any of its employees will receive any fee for or in
connection with such solicitation activities apart from the fees which it may
otherwise be entitled to receive as described under "COST AND METHOD OF
SOLICITATION".
Participant Ownership of and Transactions in Company Securities
Other than as disclosed in this Proxy Statement, neither Otter Creek nor,
to the knowledge of Otter Creek, any of the Participants nor, with respect to
clause (3), any of their respective associates: (1) owns beneficially, directly
or indirectly, or of record but not beneficially, any securities of the Company;
(2) owns beneficially, directly or indirectly, or of record but not
beneficially, any securities of any parent or subsidiary of the Company; or (3)
is, or was since January 1, 2002, a party to any contract, arrangement or
understanding with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding of proxies. Except as described herein,
the Otter Creek Participants disclaim beneficial ownership of any securities of
the Company owned by Otter Creek, and this Proxy Statement shall not be deemed
an admission that any Otter Creek Participant is the beneficial owner of such
securities for any purpose.
The following is a summary of all transactions in Company securities by
Otter Creek over the last two years. Except as otherwise indicated under
"ELECTION OF DIRECTORS", to the knowledge of Otter Creek, none of the other
Participants has purchased or sold any Company securities within the past two
years.
Amount of
Common Stock
Date of Purchased
Transaction (or Sold*) Unit Price Trade Amount
- ------------------ ------------- ------------ --------------
OTTER CREEK
PARTNERS I, L.P.
05-30-01 5000 $11.9030 $59,515.00
09-19-01 2000 $13.3825 $26,765.00
09-20-01 5500 $13.1627 $72,395.00
03-04-02 8000 $13.7519 $110,015.00
04-10-02 4800 $14.0500 $67,455.00
04-12-02 6800 $13.9800 $95,079.00
05-03-02 400 $13.9500 $55,815.00
07-23-02 2000 $14.6000 $29,215.00
08-26-02 2000 $16.0000 $32,015.00
08-27-02 4000 $15.9000 $63,615.00
09-19-02 1100 $14.8458 $16,356.38
12-11-02 400 $14.3700 $5,767.00
12-17-02 2000 $13.8100 $27,655.00
12-20-02 1000 $13.9663 $13,991.30
12-23-02 1000 $14.2000 $14,220.00
12-31-02 400 $14.2000 $5,702.80
01-02-03 5000 $14.2500 $71,055.00
01-08-03 5300 $14.2850 $75,540.00
01-13-03 200 $14.2850 $2,878.40
01-22-03 4000 $14.5148 $58,114.20
01-22-03 2300 $14.5148 $33,422.04
01-23-03 4000 $14.6463 $58,600.00
01-27-03 200 $15.2500 $3,071.40
01-28-03 400 $15.1900 $6,095.00
01-31-03 600 $15.2000 $9,141.00
02-05-03 22000 $15.5600 $342,335.00
02-11-03 250 $14.8227 $3,723.18
03-06-03 500 $14.4734 $7,256.70
03-07-03 1900 $14.7466 $28,051.84
03-10-03 3600 $14.8100 $53,331.00
03-11-03 7000 $14.8500 $103,965.00
03-31-03 700 $14.6535 $10,279.45
05-19-03 828 $13.8000 $11,449.68
05-20-03 4,100 $13.6000 $55,980.00
05-21-03 5,800 $13.4200 $77,909.00
05-23-03 4,700 $13.1308 $61,870.76
05-27-03 3,700 $13.1200 $48,559.00
05-15-03 2,200 $13.9194 $30,659.68
05-19-03 800 $13.8717 $11,120.36
05-20-03 1,500 $13.6919 $20,567.85
05-21-03 700 $13.4200 $9,416.00
05-22-03 1,500 $13.3941 $20,121.15
05-23-03 800 $13.1483 $10,541.64
06-02-03 700 $12.9700 $9,101.00
06-11-03 1300 $13.1200 $17,084.00
OTTER CREEK
INTERNATIONAL
05-30-01 5000 $11.9030 $59,515.00
09-18-01 2000 $13.6075 $27,215.00
09-19-01 2000 $13.3825 $26,765.00
09-20-01 8500 $13.1618 $111,875.00
03-04-02 12000 $13.7513 $165,015.00
03-25-02 11500 $13.7813 $158,485.00
04-10-02 9200 $14.0500 $129,275.00
04-12-02 13200 $13.9800 $184,551.00
05-03-02 7000 $13.9500 $97,665.00
07-23-02 3000 $14.6000 $43,815.00
08-26-02 2000 $16.0000 $32,015.00
08-27-02 6000 $16.0000 $95,415.00
09-09-02 200 $15.9000 $2,971.40
09-19-02 2000 $14.7500 $29,726.60
09-20-02 5000 $14.8458 $74,055.00
12-11-02 600 $14.8000 $8,643.00
12-17-02 4100 $14.3700 $56,677.00
12-20-02 1400 $13.8100 $19,596.82
12-20-02 500 $13.9877 $7,070.00
12-23-02 2000 $14.1000 $28,440.00
01-02-03 5900 $14.2000 $83,841.30
01-08-03 8700 $14.2500 $123,990.00
01-15-03 266 $14.2500 $3,812.36
01-22-03 7000 $14.5148 $101,688.60
01-22-03 3400 $14.5148 $49,399.32
01-23-03 6000 $14.6500 $87,900.00
01-28-03 800 $15.1900 $12,160.00
01-29-03 1800 $15.0100 $27,050.60
01-31-03 500 $15.1700 $7,608.50
01-31-03 900 $15.2000 $13,704.00
02-04-03 100 $15.0600 $1,526.70
02-05-03 51000 $15.5600 $793,575.00
02-11-03 450 $14.8227 $6,689.71
03-06-03 900 $14.4734 $13,050.06
03-07-03 8100 $14.7466 $119,524.16
03-10-03 6400 $14.8100 $94,799.00
03-11-03 13000 $14.8500 $193,065.00
03-31-03 1300 $14.6535 $19,077.55
*07-01-02 5000 $17.6500 $88,236.63
*07-01-02 2000 $17.6500 $35,294.65
*07-02-02 2000 $17.3500 $34,695.95
*07-02-02 8000 $17.3500 $138,783.82
05-21-03 4400 $13.4200 $59,107.00
05-23-03 7575 $13.1308 $99,708.06
05-27-03 6300 $13.1200 $82,671.00
05-15-03 3800 $13.9194 $52,946.72
05-19-03 1300 $13.8717 $18,061.21
05-20-03 2700 $13.6919 $37,010.13
05-21-03 1300 $13.4200 $17,474.00
05-22-03 2600 $13.3941 $34,865.66
05-23-03 1500 $13.1483 $19,752.45
06-02-03 1000 $12.9700 $12,995.00
06-11-03 3250 $13.1200 $42,687.50
HHMI XIII LLC
04-03-02 16000 $13.9500 $223,215.00
05-02-02 5000 $13.9000 $69,500.00
09-19-02 1000 $14.6500 $14,650.00
01-03-02 7062 $14.2059 $100,391.50
01-22-03 3000 $14.5148 $43,574.40
01-30-03 5000 $15.1500 $75,750.00
02-05-03 7800 $15.5000 $120,974.60
05-27-03 5300 $13.0472 $69,203.16
Information Regarding the Relationship between the Participants and Otter Creek
Certain of the Participants are employees of Otter Creek (the "Participant
Employees"), and they may be deemed to have an interest in the outcome of the
election of directors of the Company at the Annual Meeting by virtue of their
ownership of Otter Creek securities and employment arrangements with Otter
Creek. Consequently, set forth below is information concerning the ownership of
Otter Creek securities by the Participant Employees. Otter Creek does not have
any specific arrangements with the Participant Employees that will result in any
additional compensation if the Otter Creek Nominees are elected as directors to
the Board at the Annual Meeting or relating to any future transactions between
Otter Creek and the Company.
Set forth below are the number of shares of common stock of Otter Creek
beneficially owned by the Participant Employees within the meaning of S.E.C.
Rule 13d-3:
Issued Shares Exercisable Stock Total Beneficial
Name of Beneficial Owner Beneficially Owned Options Ownership Percentage
- ------------------------ ------------------ ----------------- ---------------- ----------
R. Keith Long 200 0 200 100%
Joseph W. O'Neill Jr. 0 0 0 0%
COST AND METHOD OF SOLICITATION
Otter Creek will bear the cost of this solicitation and will not seek
reimbursement for such costs unless one or more of the Otter Creek Nominees win
election as directors. If Otter Creek seeks reimbursement of the costs of this
solicitation from the Company, the decision whether to submit the matter of such
reimbursement to a vote of the stockholders will be made by the Board. While no
precise estimate of this cost can be made at the present time, Otter Creek
currently estimates that it will spend a total of approximately $200,000 for its
solicitation of proxies, including expenditures for attorneys, solicitors and
advertising, financial advisors, printing, transportation and related expenses
but excluding the salaries and wages of regular employees and officers. As of
June 1, 2003, Otter Creek has incurred proxy solicitation expenses of
approximately $75,000. In addition to soliciting proxies by mail, proxies may be
solicited in person or by telephone, telecopy, or email or through
advertisements. Information regarding certain employees of Otter Creek and other
representatives of Otter Creek who may solicit or participate in the
solicitation of proxies is set forth under "INFORMATION CONCERNING PERSONS WHO
MAY SOLICIT PROXIES".
Otter Creek will also reimburse brokers, fiduciaries, custodians and other
nominees, as well as persons holding stock for others who have the right to give
voting instructions, for out-of-pocket expenses incurred in forwarding this
Proxy Statement and related materials to, and obtaining instructions or
authorizations relating to such materials from, beneficial owners of Common
Stock. Otter Creek will pay for the cost of these solicitations, but these
individuals will receive no additional compensation for these solicitation
services.
Otter Creek has retained the proxy solicitation firm of Mellon Investor
Services LLC in connection with the solicitation of proxies for the Annual
Meeting. Mellon will be paid a fee of up to $50,000 for its services. Otter
Creek also has agreed to reimburse Mellon for its expenses, and to indemnify
Mellon against certain liabilities and claims incurred in connection with its
performance of services pursuant to its engagement by Otter Creek.
ADDITIONAL INFORMATION
An annual report to stockholders covering the year ended December 31,
2002, including financial statements, is required to be furnished by the Company
to its stockholders in connection with the Company's solicitation of proxies for
the Annual Meeting. That annual report is not required to be furnished by Otter
Creek and is not being furnished by Otter Creek.
Otter Creek does not have current information concerning the Common Stock
ownership of the Company, other information concerning the management of the
Company or the procedures for submitting proposals for consideration at the next
annual meeting of the Company's stockholders. Accordingly, reference is made to
the Company's proxy statement for that information. Under the federal securities
laws, Otter Creek is required to disclose certain information as to the
securities ownership of the Company's management, its current directors and the
holders of significant amounts of the Company's Common Stock. That information,
which has been obtained from the Company's preliminary proxy statement filed on
April 18, 2003, is as follows:
The following table presents information as of February 28, 2003 as to all
persons who, to the knowledge of the Company, were the beneficial owners of five
percent (5%) or more of the Company's Common Stock.
Amount and
Nature of
Beneficial Percent
Name and Address of Beneficial Owner Ownership of Class(3)
Roy F. and Joann Cole Mitte Foundation
6836 Bee Caves Road, Suite 262
Austin, TX 78746 1,552,206 (1) 16.16%
Roy F. Mitte
3701 Westlake Drive
Austin, TX 78746 1,594,326 (1)(2) 16.59%
Family Life Insurance Company
6500 River Place Blvd.
Austin, TX 78730 648,640 6.32% (3)
Investors Life Insurance
Company of North America
6500 River Place Blvd.
Austin, TX 78730 1,427,073 (4) 12.93% (5)
Fidelity Management &
Research Company
82 Devonshire Street
Boston, MA 02109 1,307,020 (6) 13.60%
Wellington Management Company, LLP
75 State Street
Boston, MA 02109 656,800 (7) 6.84%
____________________
(1) As reported on a Schedule 13D/A filed by the Roy F. and Joann Cole Mitte
Foundation on February 13, 2003. According to the 13D/A filing, The
Foundation is a not-for-profit corporation organized under the laws of the
State of Texas, and exempt from federal income tax under Section 501(a) of
the Internal Revenue Code of 1986, as amended, as an organization described
in Section 501(c)(3).
(2) Includes 35,520 shares allocated to Mr. Mitte's account under the Employee
Stock Purchase Plan and 6,600 shares which may be acquired pursuant to
options which are exercisable within 60 days. For purposes of this table,
Mr. Mitte is deemed to have beneficial ownership of the shares owned by the
Foundation.
(3) Assumes that outstanding stock options or warrants held by non-affiliated
persons have not been exercised and that outstanding stock options held by
Family Life Insurance Company have been exercised.
(4) Of such shares, 926,662 shares are owned by Investors Life Insurance
Company of North America ("Investors Life") and 500,411 shares are issuable
upon exercise of an option held by Investors Life. All shares are held as
treasury shares.
(5) Assumes that outstanding stock options or warrants held by non-affiliated
persons have not been exercised and that outstanding stock options held by
Investors Life have been exercised.
(6) As reported to the Company on a Schedule 13G filed on June 11, 2001 by FMR
Corporation, the parent company of Fidelity Management & Research Company
("Fidelity") and Fidelity Management Trust Company. The Company also notes
that Fidelity filed a Schedule 13G/A on February 13, 2001, reporting that
the beneficial ownership of Fidelity Low Price Stock Fund, an investment
company registered under the Investment Company Act of 1940, was 340,000
shares. According to the Schedule 13G filings, as amended, Fidelity acts as
investment advisor to the Fidelity Low Priced Stock Fund, and the Fund is
the beneficial owner of 340,000 shares of Company common stock.
(7) As reported on a Schedule 13G filed by Wellington Management Company, LLP
("WMC") on February 12, 2003. According to the Schedule 13G filing, WMC
acts as investment advisor to certain clients of WMC and such clients have
the right to receive, or the power to direct the receipt of, dividends
from, or the proceeds from the sale of, such securities. The filing further
states that no such client is known to have such right or power with
respect to more than five percent of the common stock of the Company.
The following table contains information as of March 25, 2003 as to the
Common Stock of Company beneficially owned by (1) each director and director
nominee, (2) each of the named executive officers, and (c) the directors and
executive officers as a group. In general, "beneficial ownership" refers to
shares that a director nominee, director or executive officer has the power to
vote, or the power to dispose of, and stock options that are currently
exercisable or become exercisable within 60 days of March 25, 2003. The
information contained in the table has been obtained by the Company from each
director nominee, director and executive officer, except for the information
known to the Company.
Amount and Nature of
Name Beneficial Ownership Percent of Class
Non-Employee Directors:
John Barnett 2,000 *
W. Lewis Gilcrease -0- --
Richard A. Kosson 1,940 *
Michael Scott Mitte (5)(6) 64 (2) *
Elizabeth T. Nash 220 *
Frank Parker 12,000 *
Employee Directors:
Roy F. Mitte (5)(6) 1,594,326 (1)(2)(3) 16.59%
Named Executive Officers:
Jeffrey H. Demgen 14,459 (2)(3) *
Theodore A. Fleron** 21,040 (2)(3) *
Eugene E. Payne** -0- --
Thomas C. Richmond 18,868 (2)(3) *
George M. Wise, III 500 *
Director Nominees (not currently Directors of Company):
Fred W. Lazenby 17,979 (4) *
James B. Morgan -0- --
Jerold H. Rosenblum -0- --
Robert C. Wilson, III -0- --
All Executive Officers, Directors,
and Director Nominees as a
group (16 persons) 1,683,396 17.45%
- ----------
* Less than 1%.
** Also a Nominee.
(1) As reported on a Schedule 13D/A filed by the Roy F. and Joann Cole
Mitte Foundation on February 13, 2003. According to the 13D/A filing, The
Foundation is a not-for-profit corporation organized under the laws of the State
of Texas, and exempt from federal income tax under Section 501(a) of the
Internal Revenue Code of 1986, as amended, as an organization described in
Section 501(c)(3). For purposes of this table, Mr. Mitte is deemed to have
beneficial ownership of the shares owned by the Foundation.
(2) Includes shares beneficially acquired through participation in the
Company's 401K Plan and/or the Employee Stock Purchase Plan, which are group
plans for eligible employees.
(3) Include shares issuable upon exercise of options granted under the
Stock Option Plan to executive officers and directors who are also employees of
the Company or its subsidiaries, to the extent that such options are exercisable
within 60 days of March 25, 2003, as follows: Mr. Demgen - 4,400 shares; Mr.
Fleron - 4,400 shares; Mr. Mitte - 6,600 shares; and Mr. Richmond - 4,400
shares.
(4) Includes: (i) shares owned by Mr. Lazenby, (ii) 1,000 shares owned by
a trust for which he acts as trustee and (iii) 2,542 shares owned by his spouse,
with respect to which he disclaims beneficial ownership.
(5) Not a Nominee.
(6) Resigned from the Board on May 15, 2003.
Certain of the information contained in this Proxy Statement is based on
publicly-available information filed by the Company with the S.E.C. Although
Otter Creek does not have any information that would indicate that any
information contained in this Proxy Statement that has been taken from such
documents is inaccurate or incomplete, Otter Creek does not take any
responsibility for the accuracy or completeness of such information.
Otter Creek is not aware of any other substantive matters to be considered
at the Annual Meeting, however, if any other matter as to which Otter Creek did
not have knowledge prior to soliciting proxies should properly come before the
Annual Meeting, Otter Creek will vote all proxies held by it in accordance with
its best judgment and consistent with the federal proxy rules.
OTTER CREEK MANAGEMENT INC.
June 12, 2003
By: /s/ R. Keith Long
--------------------------------
R. Keith Long, President
IMPORTANT
1. Your proxy is important no matter how many shares of Common Stock you own.
Be sure to vote on the GOLD proxy card. Otter Creek urges you NOT to sign
any WHITE proxy card or other proxy card which is sent to you by the
Company or any other party.
2. If you have already submitted a proxy card to the Company for the Annual
Meeting, you may change your vote to a vote "FOR" the election of the
Otter Creek Nominees and "Against" the Company's slate by signing, dating
and returning Otter Creek's GOLD proxy card, which must be dated after any
proxy card you may previously have submitted to the Company. Only your
last dated proxy card for the Annual Meeting will count at the Annual
Meeting.
3. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the person responsible for your account and direct
him or her to vote on the GOLD proxy card "FOR" election of the Otter
Creek Nominees.
4. If you hold your shares in more than one type of account or your shares
are registered differently, you may receive more than one GOLD proxy card.
We encourage you to vote each GOLD proxy card that you receive.
5. If you have any questions or need assistance in voting your shares, please
contact our proxy solicitors, Mellon Investor Services LLC, at the number
set forth below:
MELLON INVESTOR SERVICES LLC
44 Wall Street
New York, NY 10005
877-688-7273
PRELIMINARY COPY, SUBJECT TO COMPLETION
DATED ________ __, 2003
FINANCIAL INDUSTRIES CORPORATION
COMMON STOCK PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
OTTER CREEK MANAGEMENT INC.
The undersigned hereby appoints R. Keith Long and/or Ronald E. Powell (of
Mellon Investor Services LLC) as proxy for the undersigned with full power of
substitution to vote all shares of common stock of Financial Industries
Corporation (the "Company") which the undersigned is entitled to vote at the
Company's 2003 Annual Meeting of Stockholders, and any postponements or
adjournments thereof (the "Meeting"), hereby revoking all prior proxies, on the
matters set forth. Such authority includes discretionary authority by the
proxies named to cumulate votes in order to elect as many nominees as believed
possible under the prevailing circumstances.
1. Election of Directors: To Nominees: (1) R. Keith Long
elect seven directors whether (2) J. Bruce Boisture
by cumulative voting or (3) Lonnie L. Steffen
otherwise. (4) Richard H. Gudeman
(5) Steven A. Haxton
(6) Patrick E. Falconio
(7) Salvador Diaz-Verson
FOR all the nominees listed above WITHHOLD AUTHORITY to vote for
all the nominees listed above
|_| |_|
INSTRUCTION: To withhold authority to vote for any individual nominee or
nominees, write that nominee's name in the space provided below:
__________________________________________________________________________
2. In the discretion of the proxy holders, on any other matters that may
properly come before the Meeting.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS SPECIFIED.
IF A CHOICE IS NOT SPECIFIED, THE PROXY WILL BE VOTED
"FOR" THE NOMINEES LISTED ABOVE AND IN THE DISCRETION OF THE
PROXY HOLDERS ON OTHER MATTERS.
- --------------------------------------------------------------------------------
Please sign exactly as your name appears hereon. When shares are held by
two or more persons, all of them should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by an authorized officer. If a
partnership, please sign in partnership name by the authorized person.
Date____________________________ ________________________________
(SIGNATURE)
________________________________
(SIGNATURE IF HELD JOINTLY)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.